EDM Spend to Double by 2009

Spending on enterprise data management projects will double over the next four years as firms come to grips with increased data burdens mandated by regulatory pressures, according to a report from Boston-based consultancy Aite Group.

According to the report by managing partner Sang Lee, spending on EDM projects will rise at a compound annual growth rate of 15 percent over the next four years, growing from $1.1 billion last year to more than $2 billion by 2009, compared with a projected CAGR of only 3.9 percent for overall IT spend. The figures are based on aggregating data that Aite collects from institutions and on the sales pipelines of the main providers in this space, Lee says.

The growth rate is expected to be so sharp because firms have thus far put off spending in this area, most recently because of tight budgets for IT spend. "Firms have been focused on small, silo-based projects associated with short-term return on investment. EDM is a longer-term commitment," Lee says.

He says that firms are now suffering the effects of "cobbled-together," silo-based infrastructures that make it difficult to share data across the enterprise. "What they ended up with was many centralized organizations with siloed IT structures not able to handle data management across the enterprise," he says. "Firms are realizing that they can't continue down the path of not-connected silos—it doesn't give you enough timely and accurate information."

Aite estimates that the industry will spend a total of $1.29 billion on data management this year, primarily on applications relating to risk management (24 percent), portfolio management (22 percent), reference data (17 percent), and corporate actions (11 percent).

Lee says much of the investment will be driven by more stringent regulations, which demand corporate responsibility at the enterprise level rather than the level of individual business lines. "You need to know your client across the entire enterprise... and the business they are engaged in, not just, for example, in the private client segment," he says. This means that firms have to break down the silos to create a consolidated view of firms and their clients.

However, this can time-consuming and costly. Lee says creating a true EDM infrastructure comprising a single, centralized data source to collect and distribute data can mean either diverting a firm's entire IT resource for an 18-month period or developing a longer project with specific interim goals. For a lot of firms, true EDM may never be anything more than a goal, Lee says.

Lee sees promise in the recent formation of the EDM Council by IBM, SunGard and GoldenSource, though he expresses concerns about who will fund it long-term and whether those involved can work together effectively when they are in competition with each other. He also points to some notable absences from the council so far, particularly Accenture, Capco and Asset Control.

But generally, he says, "Positive things are going on in the industry in terms of awareness. It's not just one firm facing this problem, it's the whole industry. With a common enemy, they should be able to work together to get this done."